Obama crafting fix as Postal Service faces default

The UPS logo is seen outside their facility in Hodgkins, Illinois December 16, 2010. The UPS Hodgkins facility is the largest ground shipping facility and will handle over 2.5 million packages today alone. REUTERS/Frank Polich

By Emily Stephenson

WASHINGTON (Reuters) - The White House is crafting a plan to overhaul the Postal Service and wants to delay a massive health benefits obligation the agency says it cannot pay, a federal official said on Tuesday.

The White House will offer its reform plan in the next few weeks for the agency, which lost $3.1 billion last quarter and is approaching due dates for multiple billion-dollar payments, said John Berry, director of the U.S. Office of Personnel Management.

The Obama administration wants Congress to delay for 90 days a $5.5 billion retiree health benefits payment due this month. The Postal Service has said it expects to default on that payment.

That "will allow ... the time to carefully work through the details of a proposal," Berry told a Senate committee.

The Postal Service has asked Congress for a range of solutions to keep it open, including slashing payrolls, closing post offices, and scrapping Saturday delivery.

Postmaster General Patrick Donahoe said the USPS could stop delivering mail by August next year if Congress does not allow it to restructure and reduce costs.

Members of the Senate Homeland Security and Government Affairs Committee emphasized passing legislation quickly to prevent closure and expressed frustration at a lack of leadership on the issue.

"I just don't understand why the administration doesn't have a concrete plan to put before us today given the dire straits that we're in," said Republican Senator Susan Collins.

Two bills in the House of Representatives and two in the Senate take different approaches to overhauling the agency.

Congress left for recess without considering the bills and returned this week to tackle deficit reduction, raising doubts about how quickly it can compromise on relief for the Postal Service.

"If nothing is done, the Postal Service will run out of money and be forced to slash service and employees," said Democratic committee chairman Joe Lieberman. "That is the last thing our struggling economy needs."


The Postal Service, which delivers almost half of the world's mail, receives no taxpayer money to fund daily operations.

It has struggled with a precipitous decline in mail volumes as consumers increasingly use e-mail and pay bills online. The drop-off was exacerbated by the economic recession.

It has proposed cutting 220,000 jobs, or more than a third of its full-time staff, by 2015, and is studying about 3,650 of its 32,000 offices for potential closure.

The Postal Service also has proposed raiding a federal retirement fund surplus and taking over its retirement and health plans by opting out of federal programs.

OPM's Berry expressed doubt about how much financial relief that would provide. He said some federal health plans could be hard hit if USPS employees were withdrawn, and the agency would have to establish provider networks in rural areas that already exist at low administrative cost under federal plans.

"OPM believes the Postal Service and its employees and retirees are well-served by the existing health benefits program and retirement system," he said.

Postal union leaders who testified before the committee opposed pulling out of the federal programs, and criticized a recent USPS statement that it will try to get out of no-layoff protections in employee contracts.

(Editing by Cynthia Osterman and Christopher Wilson)

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